BILL ANALYSIS                                                                                                                                                                                                    Ó



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          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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