BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  April 19, 2016


                       ASSEMBLY COMMITTEE ON HIGHER EDUCATION


                                 Jose Medina, Chair


          AB 2183  
          (Gatto) - As Amended March 15, 2016


          SUBJECT:  California State University:  personal service  
          contracts.


          SUMMARY:  Establishes standards for the use of personal services  
          contracts by the California State University (CSU) Trustees.   
          Specifically, this bill:  


          1)Establishes similar requirements and review processes for  
            personal services contracting by the CSU as those that exist  
            for State agencies, as specified.


          2)Specifies that use of personal services contracting to achieve  
            costs savings is permissible when the CSU clearly demonstrates  
            that the contract will result in overall cost savings and:


             a)   Prescribes the specific costs to be included/excluded in  
               the calculation;


             b)   Prohibits approval solely on the basis of savings from  
               lower contractor pay rates or benefits, and requires that  
               wages be at the industry's level and that they do not  








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               significantly undercut university pay rates; 


             c)   Displacement of university employees, as specified, is  
               not caused by the contract; and, 


             d)   It does not affect nondiscrimination efforts, savings  
               are large enough to be maintained during cost fluctuations,  
               are clearly justified by size and duration, contracts are  
               publicly and competitively bid, and various other  
               requirements.


          3)Restricts personal services contracting, unless the following  
            conditions are met:


             a)   The Legislature mandates or authorizes work be performed  
               by independent contractors, and the contract is for a new  
               university function;


             b)   Services are unavailable or unable to be satisfactorily  
               performed within the university or by university employees;


             c)   Services are incidental to a purchase or lease contract;


             d)   The legislative, administrative, or legal goals/purposes  
               cannot be accomplished through the regular or ordinary  
               hiring process;


             e)   CSU employees cannot feasibly supply the equipment,  
               materials, facilities, or support services provided by the  
               contractor;









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             f)   The contract is for the provision of training courses  
               for which qualified CSU employees are not available; and,


             g)   The contract is for services of an urgent, temporary, or  
               occasional nature.


          4)Defines "indirect overhead costs" as the pro rata share of  
            existing administrative salaries and benefits, rent, equipment  
            costs, utilities, and materials.


          5)Defines "firm" as a corporation, partnership, nonprofit  
            organization, or sole proprietorship.


          EXISTING LAW:  


          1)Authorizes the CSU Trustees to enter into agreements with any  
            public or private agency, officer, person, or institution,  
            corporation, association, or foundation for the performance of  
            acts or the furnishing of services, facilities, materials,  
            goods, supplies, or equipment by or for the Trustees or for  
            the joint performance of an act or function or the joint  
            furnishing of services and facilities by the Trustees and the  
            other party to the agreement.  Specifies that the Trustees  
            shall prescribe policies and procedures for the acquisition of  
            services, facilities, materials, goods, supplies, or  
            equipment; and, said policies shall include competitive bids  
            or proposals as, specified (Education Code Section 89036).



          2)Provides standards for the use of personal service contracts  
            by state agencies with specific criteria for contracting  
            outside state service.  These criteria include demonstration  








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            of cost savings, definition of costs, and requirements that  
            work not be contracted out solely on the basis of lower pay  
            rates or benefits, and justification of savings based on the  
            size and duration of the contract (Government Code Section  
            19130).



          3)Establishes the State Civil Service Act and establishes the  
            State Personnel Board, as a five member body appointed by the  
            Governor and approved by the Senate, to enforce and administer  
            civil service statutes.  The Constitution establishes several  
            exemptions from the civil service, including officers and  
            employees of the University of California and the CSU (Article  
            7 of the California Constitution).
          FISCAL EFFECT:  Unknown


          COMMENTS:  Need for the measure.  According to the author, the  
          CSU is not subject to some of the same standards of  
          accountability that apply to other state agencies regarding  
          personal service contracts.  The author contends that this has,  
          "resulted in several debunk contracts, including:  a CSU that  
          ended a three-year agreement with its employees and entered into  
          a five-year contract with a private and external custodial firm,  
          which resulted in displacement of those other custodial  
          employees."


          This measure seeks to align the CSU's practice of contracting  
          out with those required by other state agencies.


          State Civil Service Act.   Provisions of the Act specifically  
          exclude officers and employees of the CSU from state civil  
          service.  Additionally, the Legislature has granted the CSU  
          other exemptions from provisions within the Act, including:  (1)  
          exclusion from Public Contract Code provisions regarding the  
          acquisition of goods and services; and, (2) authority to  








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          promulgate regulations without having to utilize the procedures  
          outlined in the Administrative Procedures Act.  


          This measure is modeled after the State Civil Service Act used  
          to govern personal services contracting within the state.  It is  
          unclear whether or not, due to the existing exemptions the  
          Legislature has conferred upon the CSU, if it is warranted for  
          the CSU to now have to align their personal services contracting  
          provisions under the Act.


          Personal services contract.  A personal services contract is any  
          contract, requisition, purchase order, etc. (except public works  
          contracts) under which labor or personal services is a  
          significant, separately identifiable element.  The business or  
          person performing these contractual services must be an  
          independent contractor that does not have status as an employee  
          of the State.  


          A cost-savings based personal services contract is a personal  
          services contract proposed to achieve cost savings and subject  
          to the provisions of existing law.


          Collective bargaining.  Provisions regarding contracting out are  
          addressed in Article 3 of the California State University  
          Employees Union (CSUEU) and Article 4 of the State Employees  
          Trades Council (SETC) collective bargaining agreements.  The  
          CSUEU agreement authorizes contracting out provided that it does  
          not displace bargaining unit employees, and defines displacement  
          to include layoff, demotion, involuntary transfer to a new  
          classification, or to a new satellite campus location, or a  
          location requiring a change of residence, and involuntary time  
          base reductions.  The CSU is required to notify the Union when  
          contracting out is to be on a long-term basis and the Union is  
          authorized to request to meet and confer on the impacts of  
          long-term contracting out work.  Prior to meeting, the CSU is  








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          required to provide CSUEU all existing relevant information,  
          including requests for proposals, copies of bids received, and  
          any cost analysis used to evaluate the need for contracting out.  
           


          The SETC agreement, prior to contracting out, requires a campus  
          to consider the availability of SETC employees to perform the  
          work, whether they have the special skills and licensure  
          necessary, whether the work can be completed within time  
          constraints applicable to the project, the availability of  
          required materials and/or equipment, and the cost involved in  
          performing the work in-house versus contracting out.   
          Notification of the Chief Campus Steward is required prior to  
          the start of any such contracted work.  


          Previous legislation.  SB 669 (Pan) of 2015, which never had a  
          vote in the Senate Education Committee, is very similar in  
          nature to this measure.


          SB 943 (Beall) of 2014, which failed to receive enough votes for  
          passage out of the Senate Education Committee, was similar to  
          this bill; and, SB 943 assigned the State Personnel Board  
          oversight of CSU contracting practices.  


          AB 2225 (Lowenthal) of 2002, which was held in the Senate  
          Education Committee, proposed similar personal services  
          contracting standards for the CSU.  


          REGISTERED SUPPORT / OPPOSITION:




          Support








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          American Federation of State, County and Municipal Employees,  
          AFL-CIO


          California State Council of the Services Employees International  
          Union


          California State University Employees Union


          Professional Engineers in California Government




          Opposition


          California Chamber of Commerce


          California State University 




          Analysis Prepared by:Jeanice Warden / HIGHER ED. / (916)  
          319-3960
















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