BILL ANALYSIS Ó
AB 1431
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB
1431 (Gomez)
As Amended August 27, 2015
Majority vote
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|ASSEMBLY: |50-25 |(May 22, 2015) |SENATE: |26-13 | (September 2, |
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Original Committee Reference: ED.
SUMMARY: Extends the authority to utilize job order contracting
(JOC) to all school districts. Specifically, this bill:
1)Changes the sunset date of the authority for the Los Angeles
Unified School District (LAUSD) to utilize JOC from December
31, 2020, to January 1, 2016.
2)Specifies that the provisions in this bill only apply to
school districts that choose to utilize JOC. Authorizes a
school district to utilize JOC, when permitted by this bill,
as an alternative to any contracting procedures that the
school district is otherwise authorized or required by law to
use.
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3)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.
4)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:
5)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 unit price catalog.
b) "Indefinite quantity" means one or more of the
construction tasks listed in the unit price catalog.
c) "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 unit
price catalog to be performed pursuant to a job order
contract.
d) "Job order contract" means a contract, awarded to the
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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.
e) "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 unit
price catalog.
f) "Job order contractor" means a licensed, bonded, and
general liability insured contractor awarded a job order
contract.
g) "Offer to perform work" means the job order contractor's
proposal for a specific job order.
h) "Plans and specifications" means the unit price catalog
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 unit price catalog.
i) "Project" means the specific requirements and work to be
accomplished by the job order contractor in connection with
an individual job order.
j) "Project labor agreement" means an agreement that meets
the requirements of Public Contract Code (PCC) Section
2500.
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aa) "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.
bb) "Proposal" means the job order contractor prepared
document quoting those construction tasks listed in the
unit price catalog 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.
cc) "Public works" has the same meaning as in Labor Code
Division 2, Part 7, Chapter 1 (commencing with Section
1720).
dd) "Public works project" has the same meaning as "public
project," as defined in PCC Section 22002.
ee) "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.
ff) "School district" means any school district.
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gg) "Unit price catalog" 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.
Process for bidding JOCs:
6)Establishes a process for bidding JOCs as follows:
a) The school district shall prepare a set of documents for
job order contracts. The documents shall include a unit
price catalog 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
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 unit price catalog
based on the job order contract technical specifications.
Awards shall be made to the prequalified bidders that the
school district determines to be the most qualified based
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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.
d) The school district may award multiple job order
contracts through a request for bid. JOCs shall be awarded
to the most qualified prequalified bidders.
e) The request for bids may encourage the participation of
local construction firms and the use of local
subcontractors.
Prequalification:
7)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
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of similar size, scope or complexity; c) licenses, bonds and
insurance; d) information regarding workers; compensation
history, safety and apprenticeship programs; and e) full
disclosure of past violations, disciplinary actions, and
lawsuits. Requires all information to be verified under oath.
Length and amount of contracts:
8)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 a maximum of $10
million if the contract is extended or renewed for the second
and final term.
9)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.
10)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.
11)Requires the dollar limits to be adjusted on January 1, 2016,
as if the limits were operative beginning January 1, 2014, to
reflect the percentage change in the California Consumer Price
Index (CPI), and requires the adjustment to be made each
January 1 thereafter to reflect the percentage change in the
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CPI.
Subletting and subcontracting:
12)Requires all work bid under the job order to comply with
existing law under the Subletting and Subcontracting Fair
Practices Act.
13)Requires the primary job order contractor to verify that the
subcontractors possess the appropriate licenses and
credentials.
14)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 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.
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.
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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.
15)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:
16)Requires a JOC to set forth the party or parties responsible
for labor compliance.
17)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.
18)Requires the school district to designate one individual to
act as a monitor to inspect job sites for labor compliance
violations.
19)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
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committed violations and prohibits the school district from
awarding a JOC or future job orders.
20)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:
21)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 the
appropriate level of management.
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c) Make all documents pertaining to the approval of the job
order available for public review.
Miscellaneous:
22)Authorizes a school district that adopts the JOC process to
adopt a payment resolution process which may include, but not
be limited to, the convening of a payment resolution
committee.
23)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.
24)Sunsets on January 1, 2022, unless a later enacted statute,
that is enacted before January 1, 2022, deletes or extends
that date.
The Senate amendments:
1)Sunset the provisions authorizing the LAUSD to utilize JOC as
a pilot project on January 1, 2016.
2)Change the term "catalog of construction tasks" to "unit price
catalog."
3)Strike, in the provisions requiring the establishment of a
prequalification process, the provisions specifying the
determination of an acceptable safety record and skilled labor
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force availability.
4)Require the dollar limits for contracts to be adjusted
according to the CPI each January 1, as if the limits were
operative beginning January 1, 2004.
5)Strike the requirement for a school district that adopts the
JOC process to submit specified reports.
6)Strike provisions establishing a payment resolution committee
and instead authorize a school district to adopt a payment
resolution process that may include the convening of a payment
resolution committee.
7)Strike the provision which finds and declares that the
Legislature is uncertain of the benefits of JOC for school
districts and looks forward to receiving specified reports.
8)Add co-authors.
9)Make minor, nonsubstantive changes.
FISCAL EFFECT: According to the Senate Appropriations
Committee, no direct state costs or mandate.
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
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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 authorizes
all school districts that have entered into a specified project
labor agreement to utilize JOC. Amendments adopted in the
Senate sunset the LAUSD authorization on January 1, 2016. If
signed into law, LAUSD can continue to use JOC under the
authority granted by this bill, which is substantially similar
to the LAUSD 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 -
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
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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
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
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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:
0001698