BILL ANALYSIS                                                                                                                                                                                                    



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          Date of Hearing:  April 13, 2016


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                           Susan Talamantes Eggman, Chair


          AB 1757  
          (Waldron) - As Amended March 17, 2016


          SUBJECT:  North County Transit District.


          SUMMARY:  Increases the North County Transit District's  
          (District) bid threshold for construction projects and raises  
          the compensation limits for the District's Board of Directors  
          (Board).  Specifically, this bill:  


          1)Increases, from $10,000 to $50,000, the threshold above which  
            the District must award contracts for construction to the  
            lowest responsible bidder after competitive bidding, except in  
            an emergency declared by a two-thirds vote of the Board.


          2)Increases, from $75 to $150, the compensation to be paid to  
            Board members and their alternates for each day the member or  
            alternate attends meetings of the Board, and increases the  
            total amount of this compensation from $300 per month to $750  
            per month.


          3)Removes a requirement that the Board adopt a resolution before  
            allowing Board members and alternates to receive compensation  
            for representing the Board at meetings of other governmental  
            entities and public agencies, and increases the compensation  








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            for these activities to the same amounts in 2), above.


          4)Makes technical corrections.


          EXISTING LAW:  


          1)Generally requires, pursuant to the Public Contract Code (PCC)  
            and with many specific exceptions, public agencies to obtain  
            competitively bid contracts for construction projects that  
            cost more than $15,000.  This amount varies depending on the  
            public agency and whether it is a city, county, special  
            district, or school, and other variables.  This limit is  
            commonly referred to as the "force account."



          2)Establishes the California Uniform Public Construction Cost  
            Accounting Act (CUPCCA), which authorizes public agencies to  
            voluntarily use their own employees on construction projects  
            that cost up to $30,000, and to use informal competitive  
            bidding procedures for construction projects that cost up to  
            $125,000, if they agree to cost accounting procedures pursuant  
            to the CUPCCA.



          3)Requires the District to award contracts for construction in  
            excess of $10,000 to the lowest responsible bidder after  
            competitive bidding, except in an emergency declared by the  
            vote 
          of two-thirds of the membership of the Board.



          4)Requires each member of the Board, including alternate members  
            that are appointed, to be paid $75 for each day the member or  








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            alternate attends meetings of the Board, not to exceed $300 in  
            any month, as well as necessary and reasonable expenses in  
            performing duties as a Board member.



          5)Authorizes the Board, by resolution, to compensate members and  
            alternates, in addition to the compensation allowed in 4),  
            above, for representing the Board at specified meetings of  
            other governmental entities and public agencies.  Allows  
            compensation to be in the same amounts specified in 4), above.  




          FISCAL EFFECT:  This bill is keyed fiscal.


          COMMENTS:  


          1)Bill Summary.  This bill raises the District's bid threshold  
            for construction contracts that must be put out to bid, from  
            the current $10,000 to a proposed $50,000.  This bill also  
            raises compensation amounts that must be paid to Board members  
            and alternates for each meeting of the District's Board, and  
            for meetings of other governmental entities and public  
            agencies that Board members or alternates attend as  
            representatives of the Board, from $75 to $150 per meeting.   
            This bill also raises the monthly cap for this compensation  
            from $300 to $750.  Finally, this bill removes a requirement  
            that the District's Board pass a resolution to authorize Board  
            members or alternates to receive compensation for attending  
            meetings of other governmental entities and public agencies.   
            This bill is sponsored by the District.



          2)Author's Statement.  According to the author, "In 2005,  








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            Senator Kehoe successfully passed legislation that revised  
            various statutes for neighboring transit services.  Among its  
            provisions, this legislation (SB 959) created a much more  
            uniform set of contracting and procurement statutes, including  
            links to already approved methods found elsewhere in statute.



            "The District's contracting statutes are relatively lean and  
            have remained largely unchanged over the years.  In order to  
            ensure the maximum amount of revenues are directed back into  
            providing services for its riders, the District always strives  
            to identify ways to be efficient in its procurement policies.   
            By aligning its contracting statutes with those of other  
            transit agencies, the District will ensure compliance with  
            approved contracting methods, as well as realize the potential  
            for savings through efficient procurement.





            "In a similar vein, currently, District Board Members are  
            compensated at $75 per meeting, 


            an amount that has remained unchanged since 1988.  This amount  
            is also only half of what representatives of other local and  
            regional boards receive for the same commitment of time.  In  
            addition, Board Members routinely serve on other regional  
            boards on behalf of the District, where their counterparts  
            receive compensation that is double their amount.



            "This proposal would provide consistent, approved procurement  
            options for the District in order to obtain the best value for  
            riders and taxpayers.  The proposal would also ensure  
            compensation for Board Members is commensurate with that of  








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            other regional entities they serve on for the District."





          3)Background.  SB 959 (Kehoe), Chapter 557, Statutes of 2005,  
            revised and updated the authority of the San Diego  
            Metropolitan Transit Development Board (MTDB), including  
            increasing the threshold amount for procurement and bidding  
            for various purchases and services.



            SB 1703 (Peace), Chapter 743, Statutes of 2002, created a  
            consolidated transportation agency in San Diego from specified  
            existing agencies, including the San Diego Association of  
            Governments (SANDAG), the MTDB, and the District, and  
            authorized that agency to assume certain responsibilities.   
            SANDAG is responsible for many public transit and long-term  
            transportation planning and programming responsibilities that  
            formerly resided with MTDB and the District Board.  SB 1703  
            established the general authority and powers of the revamped  
            SANDAG in an attempt to create an agency with the power to  
            develop a comprehensive regional public transportation system.  
             In addition to the planning functions, SB 1703 transferred  
            project development and construction activities to SANDAG,  
            except on certain existing projects, and sought to refocus  
            MTDB and the District primarily as agencies operating public  
            transit services.  





          4)District Audits.  In 2012, the District requested an  
            independent auditor to perform an analysis of contract  
            administration functions at the District.  The SC&H Group  
            performed an audit and documented 19 findings outlined by  








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            observations, risks, and recommendations.  While all of the  
            issues identified in the report are related to contract  
            administration, the following issues most closely relate to  
            the contents of this bill.  The Review of Contract  
            Administration performed for North County Transit District,  
            dated September 14, 2012, states the following: 



               "Avoidance of Competitive Procurement.  Observation:  It  
               appears that sole source procurements are overused without  
               appropriate justification.  Further, it appears that sole  
               source procurements can be used as 'work arounds' to avoid  
               the competitive procurement process.  Additionally, the  
               on-call policy suggests, that for on call engineering tasks  
               greater than $100,000, the PM [project manager] should  
               solicit more than one proposal from on-call vendors for  
               specific tasks to be procured; however, that policy is not  
               enforced.  It was noted that competitively procured on-call  
               contracts are FTA (Federal Transit Administration)  
               compliant and has been an efficient process to meet  
               engineering and consultant needs without having to procure  
               each task separately through the competitive procurement  
               process.  





               "Risk:  Attempting to avoid the competitive procurement  
               process by using sole source procurements may result in  
               increased regulatory scrutiny and potential fines.  Failing  
               to adhere to the on-call policy could potentially prevent  
               the District from receiving the best value.  













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               "Policies and Procedures.  Observation:  It appears that  
               the current Procurement Manual is out of date and in  
               certain instances, inaccurate.  The references do not agree  
               to the appendices, appendices are outdated, and there are  
               references to software, documentation, and positions that  
               are no longer used.  It does not appear that the CAs  
               [contract administrator] are following all procedures  
               outlined in the manual.  Additionally, it appears that the  
               CAs are performing duties that are not detailed in the  
               manual, as there is no clear guidance as to who should  
               perform these duties.  





               "Risk:  The lack of updated policies and procedures may  
               prevent Management from establishing appropriate internal  
               controls and may create an opportunity for the District  
               staff to continue relying on 'work-arounds' rather than  
               adhering to the implemented processes."  





            Following the audit, the District released a Management Action  
            Plan on June 20, 2013, stating that 11 of the 19 recommended  
            improvements were completed.  The Management Action Plan  
            stated the following, "On-call contracts are competitively  
            procured and rates are established as part of the final  
            contract.  In September 2012, the Executive Director restated  
            FTA guidance and the District's position on competitive and  
            sole source procurements.  A sole source procurement review  
            committee has been established.  The sole source procurement  
            request process and form were updated.  Updated Procurements  
            and Contracts Administration Manual will be completed by  
            December 2013."  









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            Despite the Management Action Plan of 2013, the addition of  
            two staff positions for procurement, and a $157,000 contract  
            with an outside consulting group to help prepare the District  
            for its triennial review by the FTA, an additional audit in  
            2014 by the Calyptus Consulting Group Inc. found multiple  
            problems with the District's procurement process, particularly  
            with its compliance with mandates for full and open  
            competition.  The FTA's 2015 review also found deficiencies  
            with the District's performance in complying with federal  
            requirements for contract administration.  Nine of the 13  
            problems identified in the FTA's review were in procurement.





          5)The CUPCCA.  The CUPCCA was created in 1984 as a voluntary  
            program intended to provide flexibility in the execution of  
            public works projects, accelerate project delivery, and  
            provide uniformity in the cost accounting standards for  
            construction contracts that are used to determine when  
            projects must be put out for bid.  



            The CUPCCA allows public agencies to use their own employees  
            for construction projects that cost up to $30,000 if they  
            agree to the project cost accounting standards prescribed by  
            the CUPCCA.  If they do not agree to the standards prescribed  
            by the CUPCCA, public agencies are required to let out for bid  
            construction projects that will cost more than $15,000,  
            although this amount can vary widely depending on the public  
            agency.  The CUPCCA also allows participating public agencies  
            to use informal competitive bidding procedures for projects  
            that will cost up to $125,000.  








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            Generally, public agencies that do not participate under the  
            provisions of the CUPCCA may use informal bidding procedures  
            for contracts that cost up to their force account limit.   
            Participating agencies include cities, counties, community  
            college districts, school districts, and special districts.





          6)Policy Consideration.  The Committee may wish to consider the  
            following: this bill provides that if the Commission on State  
            Mandates determines that this bill contains costs mandated by  
            the state, reimbursement to local agencies for those costs  
            shall be made pursuant to current law governing state mandated  
            local costs.  This bill is sponsored by the District;  
            therefore, the mandate language should state that no  
            reimbursement is required because the local agency is  
            requesting this authority.  



          7)Committee Amendment.  The Committee may wish to consider the  
            following amendment:  given the continued challenges the  
            District has faced with its procurement processes, the  
            Committee may wish to consider striking Section 1 of the bill,  
            which raises the District's bid threshold.



          8)Related Legislation.  AB 2030 (Mullin) of 2016 makes a number  
            of changes to the bid thresholds for the San Francisco Bay  
            Area Transit District and the San Mateo County Transit  
            District.  AB 2030 is pending in this Committee.








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          9)Previous Legislation.  AB 1988 (Chavez) of 2014 would have  
            authorized the District to use any procurement method  
            authorized for state or local agencies under state or federal  
            law and made several other changes to the District's Act,  
            including increasing the compensation for Board members and  
            alternates from $75 to $150 for each day the member or  
            alternate attends a meeting of the Board and increasing the  
            monthly cap from $300 to $600.  AB 1988 was held in this  
            Committee. 



            AB 2447 (Cooley) of 2014 would have raised the bid threshold,  
            from $5,000 to $25,000, above which the Sacramento Regional  
            Transit District must award construction contracts for transit  
            works or transit facilities to the lowest responsible bidder.   
            AB 2447 was held in this Committee.





            SB 959 (Kehoe), Chapter 557, Statutes of 2005, increased the  
            threshold amount for procurement and bidding for various  
            purchases and services for the MTDB, including an increase on  
            the bid amount for construction contracts from $20,000 to  
            $50,000.





          10)Arguments in Support.  The District, sponsor of this measure,  
            states, "This is an important effort to ensure parity of the  
            District's board compensation and contracting services with  
            neighboring agencies, while maintaining the integrity of a  








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            fair and competitive bidding process.  This measure will put  
            the District in line with other transit agencies in the  
            region, and will result in improved contracting due to more  
            time efficiency and reduction of costs.



          11)Arguments in Opposition.  The State Building and Construction  
            Trades Council, in opposition, states, "This legislation  
            substantially increases the competitive bidding threshold and  
            in turn, the dollar amount allowed to utilize 'force account'  
            in-house employees to perform construction projects for the  
            North County Transit District.  This change will eliminate the  
            opportunity for private construction contractors to bid on the  
            work, reduces the job potential for their local workforce to  
            be employed on these projects, and prevents the public from  
            knowing if they are getting the best value for their tax  
            dollars.  Competitive bid thresholds are designed to protect  
            taxpayer dollars by ensuring competition, public scrutiny, and  
            openness.



            "The Legislature addressed the 'force account' issue in total  
            in 1983 when it created the California Uniform Public  
            Construction Cost Accounting Act which provides public  
            agencies (on a voluntary opt-in basis) much larger competitive  
            bidding, informal bidding, and force account thresholds in  
            exchange for a true cost accounting procedure.  This Act?is  
            designed to protect public funds, provide participating  
            agencies flexibility and prevent consternation in the  
            Legislature over these types of issues.  We would suggest that  
            a better course of action for the North County Transit  
            District would be to look into opting into the California  
            Uniform Public Construction Cost Accounting Act."












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          REGISTERED SUPPORT / OPPOSITION:




          Support


          North County Transit District [SPONSOR]




          Opposition


          Air Conditioning Sheet Metal Association


          Air-conditioning & Refrigeration Contractors Association


          California Chapters of the National Electrical Contractors  
          Association










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          California Legislative Conference of the Plumbing, Heating and  
          Piping Industry


          California State Council of Laborers


          California-Nevada Conference of Operating Engineers


          Construction Industry Force Account Council


          State Building and Construction Trades Council


          United Contractors


          Wall and Ceiling Alliance




          Analysis Prepared by:Angela Mapp / L. GOV. / (916) 319-3958