BILL ANALYSIS Ó
AB 1431
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON EDUCATION
Patrick O'Donnell, Chair
AB 1431
(Gomez) - As Amended March 26, 2015
SUBJECT: Local Agency Public Construction Act: job order
contracting
SUMMARY: Extends the authority to utilize job order contracting
(JOC) to all school districts. Specifically, this bill:
1)Specifies that nothing in this bill shall prohibit the school
district from utilizing JOC, as an alternative to any
contracting procedures that the school district is otherwise
authorized or required by law to use.
2)Authorizes a school district to utilize JOC only if the school
district has entered into a project labor agreement or
agreements that will apply to all public works in excess of
$25,000 undertaken by the school district through at least
December 31, 2021, regardless of what contracting procedure is
used to award that work.
3)Requires the school district to prepare an execution plan for
all modernization projects that may be eligible for JOC.
Requires the school district to select from that plan a
sufficient number of projects to be initiated as JOC during
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each calendar year and to determine for each selected project
that JOC will reduce the total cost of that project.
Prohibits JOC from being used if the school district finds
that it will increase the total cost of the project.
Definitions:
4)Establishes the following definitions:
a) "Adjustment factor" means the job order contractor's
competitively bid adjustment to the school district's
prices as published in the catalog of construction tasks.
b) "Catalog of construction tasks" means a book containing
specific construction tasks and the unit prices to install
or demolish that construction. The listed tasks shall be
based on generally accepted industry standards and
information, where available, for various items of work to
be performed by the job order contractor. The prices shall
include the cost of materials, labor, and equipment for
performing the items of work. The prices shall not include
overhead and profit. All unit prices shall be developed
using local prevailing wages.
c) "Indefinite quantity" means one or more of the
construction tasks listed in the catalog of construction
tasks.
d) "Job order" means a firm, fixed priced, lump-sum order
issued by the school district to a job order contractor for
a definite project scope of work as compiled from the
catalog of construction tasks to be performed pursuant to a
job order contract. No single job order may exceed $1
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million in value.
e) "Job order contract" means a contract, awarded to the
most qualified bidder, between the school district and a
licensed, bonded, and general liability insured contractor
in which the contractor agrees to a fixed period, fixed
unit price, and indefinite quantity contract that provides
for the use of job orders for public works or maintenance
projects.
f) "Job order contract technical specifications" means a
book, published by the school district, detailing the
technical specifications with regard to quality of
materials and workmanship to be used by the job order
contractor in accomplishing the tasks listed in the catalog
of construction tasks.
g) "Job order contractor" means a licensed, bonded, and
general liability insured contractor awarded a job order
contract.
h) "Offer to perform work" means the job order contractor's
proposal for a specific job order.
i) "Plans and specifications" means the catalog of
construction tasks and the job order contract technical
specifications. The scope of work to be performed with a
job order contract is potentially, but not necessarily, all
the tasks published in the catalog of construction tasks.
j) "Project" means the specific requirements and work to be
accomplished by the job order contractor in connection with
an individual job order.
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aa) "Project labor agreement" means an agreement that meets
the requirements of Public Contract Code (PCC) Section
2500.
bb) "Project scope of work" means the document and related
drawings, specifications, and writings referenced therein
which together set forth the specific requirements and work
to be accomplished by the job order contractor in
connection with an individual job order.
cc) "Proposal" means the job order contractor prepared
document quoting those construction tasks listed in the
catalog of construction tasks that the job order contractor
requires to complete the project scope of work, together
with the appropriate quantities of each task. The pricing
of each task shall be accomplished by multiplying the
construction task unit price by the proposed quantity and
the contractor's competitively bid adjustment factor. The
proposal shall also contain a schedule for the completion
of a specific project scope of work as requested by the
school district. The proposal may also contain approved
drawings, work schedule, permits, or other documentation as
the school district may require for a specific job order.
dd) "Public works" has the same meaning as in Chapter 1
(commencing with Section 1720) of Part 7 of Division 2 of
the Labor Code.
ee) "Public works project" has the same meaning as "public
project," as defined in PCC Section 22002.
ff) "Subcontractor" means any person, firm, or corporation,
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other than the employees of the job order contractor, who
is bonded and general liability insured and who contracts
to furnish labor, or labor and materials, at the worksite
or in connection with a job order, whether directly or
indirectly on behalf of the job order contractor.
gg) "School district" means any school district other than
the Los Angeles Unified School District.
Process for bidding JOCs:
5)Establishes a process for bidding JOCs as follows:
a) The school district shall prepare a set of documents for
each job order contract. The documents shall include a
catalog of construction tasks and preestablished unit
prices, job order contract technical specifications, and
any other information deemed necessary to describe
adequately the school district's needs. Any architect,
engineer, or consultant retained by the school district to
assist in the development of the job order contract
documents shall not be eligible to participate in the
preparation of a bid with any job order contractor.
b) Based on the documents prepared, the school district
shall prepare a request for bid that invites prequalified
job order contractors to submit competitive sealed bids in
the manner prescribed by the school district.
c) The prequalified job order contractors, as determined by
the school district, shall bid one or more adjustment
factors to the unit prices listed in the catalog of
construction tasks based on the job order contract
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technical specifications. Awards shall be made to the
prequalified bidder that the school district determines to
be the most qualified based upon preestablished criteria
made by the school district. The prequalified bidder must
be in compliance with the school district's project labor
agreement.
i) Compliance shall constitute no more than three major
violations on any school district projects within the
last three years. If a contractor has more than three
violations within a three-year period of time, the school
district shall seek administrative review of the
violations. Violations will include, but are not limited
to, failure to register core workers with the appropriate
building trade union, failure to assign apprentices in
accordance with the Labor Code, failure to comply with
the requirement to provide a minimum of seven days of
notice for the addition of any subcontractor or
substation of subcontractor, and incorrect assignment of
work in accordance with the school district's project
labor agreement.
d) The school district may award multiple job order
contracts. Each job order contract shall be awarded to the
most qualified prequalified bidder.
e) The request for bids may encourage the participation of
local construction firms and the use of local
subcontractors.
Prequalification:
6)Requires the school district to establish a procedure to
prequalify job order contractors using a standard
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questionnaire that includes, at a minimum, the issues covered
by the standardized questionnaire and model guidelines for
rating bidders developed by the Department of Industrial
Relations (DIR). This questionnaire shall require information
including, but not limited to, the following: a) a listing of
all partners; b) evidence of ability to complete the project
of similar size, scope or complexity; c) licenses, bonds and
insurance; d) information regarding workers; compensation
history, safety and apprenticeship programs; e) safety record;
f) skilled labor force availability; and g) full disclosure of
past violations, disciplinary actions, and lawsuits. Requires
all information to be verified under oath.
Length and amount of contracts:
7)Specifies that the maximum total dollar amount that may be
awarded under a single job order contract shall not exceed $5
million in the first term of the contract or $10 million
(adjusted annually to reflect changes in the consumer price
index) if the contract is extended or renewed for the second
and final term.
8)Specifies that the initial JOC contract may be no more than 12
months, with the option of extending or renewing the JOC for
two 12-month periods. The extension or renewal shall be
mutually agreed to by the school district and the job order
contractor.
9)Provides that the school district may issue job orders to the
job order contractor that has been awarded the JOC. Prohibits
the job order from commencing for seven days from the time the
job order was issued. Requires the job order contractor to
provide a minimum of seven days' notice for the addition of
any subcontractor or substitution of any subcontractor.
Limits single job orders to no more than $1 million.
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Prohibits splitting or separating a project into smaller job
orders to evade the cost limitations, and requires all work
perfected under the JOC to be covered by a project
stabilization agreement.
Subletting and subcontracting:
10)Requires all work bid under the job order to comply with
existing law under the Subletting and Subcontracting Fair
Practices Act.
11)Requires the primary job order contractor to verify that the
subcontractors possess the appropriate licenses and
credentials.
12)Authorizes the primary job order contractor to use
subcontractors that are not listed at the time the job order
is issued if the work to be performed is less than $10,000 and
requires the job order contractor to comply with both of the
following:
a) Provide public notice of the availability of work to be
subcontracted by trade. The public notice shall provide
information regarding the job, including the scope of work,
the project location, information regarding the primary job
order contractor, and the closing date, time and location
for sealed bids to be submitted.
b) Take sealed bids from the subcontractors and publicly
open the bids at a prescribed time and place. Notify the
school district which subcontractor was selected.
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i) Requires the notification to include every
subcontractor for all tiers and identify the scope of
work to be performed by each subcontractor to the job
order, broken down by craft.
ii) Requires the primary job order contractor to provide
a minimum of seven days' notice to the school district of
any substitution along with the justification as to the
need for the substitution. Authorizes the school
district to request a hearing to evaluate the
substitution request.
13)Authorizes a school district to terminate the job order,
declare the contractor ineligible for future job orders and
rescind prequalification status if the school determines that
a violation of the Subletting and Subcontracting Fair
Practices Act has occurred, including bid shopping by the
primary job contractor.
Labor Provisions:
14)Requires a JOC to set forth the party or parties responsible
for labor compliance.
15)Requires the job order contractor to pay the prevailing wage
in effect at the time the job order is issued by the school
district and all increases as published by the DIR for the
term of the JOC, including all overtime, holiday and shift
provisions.
16)Requires the school district to designate one individual to
act as a monitor to inspect job sites for labor compliance
violations.
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17)Specifies that a willful violation of the Subletting and
Subcontracting Fair Practices Act occurs when the job order
contractor or subcontractor knew or reasonably should have
known of his or her obligations under the public works law and
deliberately fails to refuses to comply. Requires school
districts to publish and distribute to the Labor Commissioner
a list of all job order contractors or subcontractors who
committed violations and prohibits the school district from
awarding a JOC or future job orders.
18)Provides that when the job order is more than $30,000 or 20
working days, all general contractor or subcontractors must
comply with the Labor Code relating to apprentices. Requires
the job order contractor to notify apprenticeship programs
that can supply apprentices to the site of the job order,
specifies apprentice to journeyman ratios, payment of
prevailing wage, and requires every apprentice to be hired
from the local joint labor management apprenticeship committee
that has jurisdiction in the geographic area of the project.
a) Imposes a civil penalty of $100 for each full calendar
day of noncompliance with specified apprentice employment
provisions. A job order contractor or subcontractor shall
be imposed a $300 per day penalty for a second or
subsequent violation, and shall not be awarded any further
job orders under the JOC or be allowed to bid on any future
JOCs for one year.
Fraud, waste and abuse prevention:
19)Requires school districts to do all of the following to
prevent fraud, waste and abuse:
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a) Prepare an independent cost estimate for all job orders
under a JOC. If a contractor's proposal is found to be
unreasonable, not cost effective, or undesirable, the
school district is not obligated to issue the job order to
the job order contractor and may utilize other procurement
procedures.
b) Have the job order reviewed and approved by at least two
levels of management.
c) Make all documents pertaining to the approval of the job
order available for public review.
Report:
20)Requires a school district that adopts the JOC process to
submit a report, prepared by an independent third party,
before December 31, 2019, to the following: the Office of
Public School Construction, Department of General Services,
the Senate Committee on Business, Professions and Economic
Development, the Assembly Committee on Business, Professions
and Consumer Protection, the Senate and Assembly Committees on
Education, and the Joint Legislative Budget Committee.
Requires the report to be completed by an independent third
party and include a listing of all projects completed under
each JOC, the job order contractor that was awarded each
contract, the estimated and actual project costs, the
estimated procurement time savings, a description of any
written protests and the resolution of the protests, an
assessment of the prequalification process, a description of
the labor force compliance programs, and recommendations
regarding the most appropriate uses for the job order contract
process.
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Miscellaneous:
21)Establishes a payment resolution committee to be composed of
representatives of the contractor, labor, director of
facilities, and the director of the facilities support
services within the school district, to be contacted by the
contractor if payment is not received within 30 days.
Requires the committee to make its recommendation of payment
within three business days.
22)Expresses the intent of the Legislature to authorize school
districts other than the LAUSD to use an alternative and
optional procedure for bidding of public works projects and
expresses the benefits of a JOC project delivery system as
including accelerated completion of projects, cost savings,
and reduction in construction contracting complexity for
school districts.
23)Expresses the intent of the Legislature that a moratorium be
placed on the enactment of any additional legislation
authorizing school districts to use JOC until the Legislature
has received the reports required by this bill and the report
required of LAUSD.
24)Sunsets on January 1, 2022, unless a later enacted statute,
that is enacted before January 1, 2022, deletes or extends
that date.
EXISTING LAW:
1)Requires the governing board of a school district to
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competitively bid and award to the lowest bidder contracts
involving the following:
a) An expenditure of $50,000 or more for the purchase of
equipment, materials, or supplies, services (except for
construction services), and repairs.
b) An expenditure of $15,000 or more for a public contract
project defined as construction, reconstruction, erection,
alteration, renovation, improvement, demolition, repair,
painting or repainting of any publicly owned, leased, or
operated facility. (Public Contract Code (PCC) Sections
20111 and 22002)
2)Authorizes the LAUSD to use JOC until December 31, 2020.
FISCAL EFFECT: The Legislative Counsel has keyed this bill as a
state-mandated local program.
COMMENTS: 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. The
traditional method for awarding public works contracts is
through the "design-bid-build" method. 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. Alternative methods for awarding contracts
have emerged over time, including design-build, which enables a
school district to issue a bid for both the design and
construction of projects over $10 million; best value which
authorizes school districts to consider factors other than cost,
and JOC.
What does this bill do? AB 14 (J. Horton), Chapter 885,
Statutes of 2003 authorized LAUSD to use JOC. The original
sunset of December 1, 2007 was extended to December 1, 2012,
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which was extended in 2012 by AB 2580 (Furutani) to December 31,
2020. This bill expands the authority to all school districts
that have entered into a specified project labor agreement,
except LAUSD, and is substantially similar to the LAUSD
authorization. Rather than creating a new article for all other
school districts, the author may wish to consider integrating
the two into one process and authorization.
What is JOC? JOC is an alternative method for awarding contracts
that is not based on bids for a specific project, but rather
based on prices for specific construction tasks. A catalog or
book identifies all work that could be performed for, typically
maintenance or modernization projects, and the unit prices for
each of those tasks. The tasks are based on accepted industry
standards and prices include the cost of materials, labor, and
equipment for performing the work, but exclude overhead and
profit. A contractor, who has been prequalified, submits bids
using an adjustment factor. The unit price, multiplied by the
adjustment factor equals the price the contractor is willing to
accept for work for those tasks. Selection of the contractors
is based on the lowest responsible bidder; however, a school
district may select more than one contractor. When the school
district has a project that requires the tasks for which a
contractor has been awarded, the school district will provide a
job order with the details of the job. The authorization for
LAUSD and this bill limit the amount for each job order to $1
million and the total amount of the initial contract for a
contractor to $5 million and renewed for two more 12-month terms
for $10 million. JOC allows a school district to identify
contractors for specific tasks and locks in the price for up to
$5 million worth of work. JOC is intended to reduce costs and
accelerate completion of smaller projects; it is not generally
viewed as an appropriate method of contracting for large,
complex construction projects that require extensive or
innovative design or are likely to encounter changes and
revisions during constructions.
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This bill, similar to the LAUSD authorization, requires a
prospective contractor to first complete a questionnaire and
become prequalified prior to submitting a bid. The
questionnaire allows school districts to screen potential
contractors to ensure that the contractor has all required
licenses, insurances and bonds, and have not committed
violations. The questionnaire will also enable a school
district to assess whether the contractor has engaged in similar
size and scope of work previously. The LAUSD authorization and
this bill also establish a process for contractors to hire
subcontractors after the contractor has been awarded a contract
as well as a process for labor compliance, hiring apprentices,
and measures to prevent fraud, waste and abuse.
LAUSD report. In its report to the Legislature in 2011, the
LAUSD stated that for "job orders completed through November 1,
2011, actual project costs were reduced by an average of 9.26%
as compared to the estimates and the procurement time. The
procurement time savings varied among projects, but overall,
produced significant time savings and provided the LAUSD with a
valuable procurement tool."
The LAUSD final report also stated that, "Generally, JOC master
contracts are one year in duration with provisions to extend up
to a total of three years. However, payments under a contract
cannot exceed $10 million in total, but there is no limit on the
number of JOC projects that can be conducted under this cost
ceiling. Since the inception of JOC in 2005, the [LAUSD] has
executed 138 master contracts with 44 different contracting
firms. As of November 1, 2011, the [LAUS D] has issued JOC
'master' contracts valued at up to $791 million - with total
contract receipts ranging from $200,000 to $10 million per
contractor? Through November 1, 2011, 3,343 JOC projects have
been completed with a total value of $307 million? These
competitively bid contracts involve general contractors, as well
as specialty trades such as plumbing, electrical, roofing, and
asbestos abatement. Each contract is separately bid and an
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individual contractor is permitted to hold multiple JOC
contracts at one time. These contracts have a minimum
guaranteed amount of $25,000."
Committee amendments:
1)Staff recommends correcting a drafting error. On page 10,
line 2, strike "stabilization" and insert "labor".
2)The bill requires a school district to designate one
individual within its labor compliance office to monitor and
inspect job sites to investigate labor violations. This
language was modeled after LAUSD's authorization. LAUSD may
have a labor compliance office, but not every school district
may have one. Staff recommends striking reference to labor
compliance office. On page 11, line 38, strike "within its"
and on line 39, strike "labor compliance office".
3)Section 20919.14 expresses the intent of the Legislature that
a moratorium be placed on the enactment of any additional
legislation authorizing school districts to use JOC until the
Legislature has received LAUSD's report and the reports as a
result of this bill in 2019. Since this bill expands the
authority to all school districts, this provision is
unnecessary. Staff recommends striking this provision.
Arguments in support. The author states, "Public Contracting
Code section 20919 et seq. authorizes LAUSD to utilize JOC. The
program has proven to be cost-effective and efficient, reducing
costs by 9.2% and cutting total procurement time by more than
50%. LAUSD's model is successful in large part to the project
stabilization agreement (also known as a project labor
agreement, or PLA). The PLA was instrumental in ensuring the
district had access to a skilled workforce. The PLA focuses on
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hiring residents from LAUSD's geographic boundaries. It has
opened the door to a career in construction for thousands of
young men and women. The relationship between local worker
organizations, their apprenticeship programs, and school
districts is being replicated through the increasing use of
project labor agreements statewide.
The State has supported expanding the use of PLAs. PLA
protections exist in Public Contract Code 2500, in design-build
statutes, labor code enforcement statutes, and AB 155 (Alejo-
Statutes of 2014). Cities, counties, transit agencies, special
districts, school and community college districts, private
projects, the State Judicial Council, High Speed Rail Authority
are some of the many entities that have established PLA policies
or delivered projects under PLA."
Arguments in opposition. The Bay Area Business Roundtable
opposes the bill and states, "We oppose AB 1431 because its
[sic] not inclusive and makes no economic development sense. It
excludes state approved ABC and other merit shop apprentices.
This bill is going to have a huge impact on many of the
contractors who perform school construction if a statewide PLA
[project labor agreement] mandates is in place for school
districts that wish to utilize Job Order Contracting."
Prior related legislation. AB 2580 (Furutani), Chapter 825,
Statutes of 2012, extended the sunset date on the LAUSD JOC
pilot project from December 1, 2012, to December 31, 2020 and
made a number of programmatic changes to the JOC process.
AB 2362 (Horton), Chapter 570, Statutes of 2006, extended the
sunset date on the LAUSD's JOC pilot project from December 1,
2007, to December 1, 2012.
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AB 14 (Horton), Chapter 889, Statutes of 2003, authorized the
LAUSD's JOC pilot program, and required an interim report on the
JOC program to the Legislature and the Office of Public School
Construction by June 30, 2005. This bill required JOC to sunset
on December 1, 2007.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file
Opposition
Air Conditioning Trade Association
Associated Builders and Contractors of California (ABC
California)
Associated Builders and Contractors - San Diego
Bay Area Business Roundtable
Plumbing-Heating-Cooling Contractors Association of California
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Western Electrical Contractors Association
Analysis Prepared by:Sophia Kwong Kim / ED. / (916) 319-2087