BILL ANALYSIS Ó
AB 1431
Page 1
ASSEMBLY THIRD READING
AB
1431 (Gomez)
As Amended April 30, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+---------------------+--------------------|
|Education |5-2 |O'Donnell, McCarty, |Chávez, Kim |
| | |Santiago, Thurmond, | |
| | |Weber | |
| | | | |
|----------------+------+---------------------+--------------------|
|Appropriations |11-4 |Gomez, Bloom, Bonta, |Bigelow, Chang, |
| | |Calderon, Eggman, |Gallagher, Wagner |
| | | | |
| | | | |
| | |Eduardo Garcia, | |
| | |Holden, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Extends the authority to utilize job order contracting
(JOC) to all school districts. Specifically, this bill:
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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 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,
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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 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
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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.
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
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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 Labor Code
Division 2, Part 7, Chapter 1 (commencing with Section 1720).
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,
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 (LAUSD).
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 pre-established 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
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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 technical
specifications. Awards shall be made to the prequalified
bidder that the school district determines to be the most
qualified based upon pre-established 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.
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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 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.
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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. Prohibits
splitting or separating a project into smaller job orders to
evade the cost limitations, and requires all work performed
under the JOC to be covered by a project labor 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
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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.
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.
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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.
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
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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:
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
Business, Professions and Economic Development Committee, the
Assembly Business and Professions Committee, the Senate and
Assembly Education Committees, and the Joint Legislative Budget
Committee. Requires the report to be completed by an
independent third party and include a listing of all projects
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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.
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)Sunsets on January 1, 2022, unless a later enacted statute,
that is enacted before January 1, 2022, deletes or extends that
date.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, negligible fiscal impact. Use of JOC is voluntary and
presumably K-12 districts will choose this process for specific
projects upon determining a potential for savings in terms of
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project schedule and/or costs.
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 (Jerome Horton), Chapter 885,
Statutes of 2003, authorized LAUSD to use JOC. The original
sunset of December 1, 2007, was extended to December 1, 2012,
which was extended in 2012 by AB 2580 (Furutani), Chapter 825,
Statutes of 2012, 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
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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.
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
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procurement time savings varied among projects, but overall,
produced significant time savings and provided the LAUSD with a
valuable procurement tool."
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 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."
Arguments in opposition. The Bay Area Business Roundtable opposes
this bill and states, "We oppose AB 1431 because its [sic] not
inclusive and makes no economic development sense. It excludes
state approved Associated Builders and Contractors of California
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 mandates is in place for school
districts that wish to utilize Job Order Contracting."
Analysis Prepared by:
Sophia Kwong Kim / ED. / (916) 319-2087 FN:
0000480
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