BILL ANALYSIS Ó
AB 1757
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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