BILL ANALYSIS Ó AB 1431 Page 1 ASSEMBLY THIRD READING AB 1431 (Gomez) As Amended April 30, 2015 Majority vote ------------------------------------------------------------------ |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 | | | | | | | | | | | | ------------------------------------------------------------------ SUMMARY: Extends the authority to utilize job order contracting (JOC) to all school districts. Specifically, this bill: AB 1431 Page 2 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, AB 1431 Page 3 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 AB 1431 Page 4 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 AB 1431 Page 5 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 AB 1431 Page 6 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. AB 1431 Page 7 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. AB 1431 Page 8 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 AB 1431 Page 9 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. AB 1431 Page 10 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 AB 1431 Page 11 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 AB 1431 Page 12 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 AB 1431 Page 13 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 AB 1431 Page 14 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 AB 1431 Page 15 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 AB 1431 Page 16