BILL ANALYSIS Ó
SENATE COMMITTEE ON EDUCATION
Senator Carol Liu, Chair
2015 - 2016 Regular
Bill No: AB 2183
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|Author: |Gatto |
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|Version: |May 31, 2016 Hearing |
| |Date: June 22, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Lenin DelCastillo |
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Subject: California State University: personal services
contracts
SUMMARY
This bill establishes standards for the use of personal services
contracts by the California State University (CSU).
BACKGROUND
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 § 89036)
2) Provides standards for the use of personal service
contracts by state agencies with specific criteria for
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contracting outside state service. The criteria includes
demonstration of cost savings, definition of costs, and
requirements that work is not 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 § 19130)
3) Establishes the State Civil Service Act and establishes
the State Personnel Board, a 5 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 California State University. (Article 7
of the California Constitution)
ANALYSIS
This bill:
1) Specifies that the purpose of this section is to
establish standards for the use of personal services
contracts.
2) Provides that if the California State University (CSU)
Trustees enter into a new contract, or renew or extend an
existing contract, for services that are currently or
customarily performed by the CSU's employees, the following
requirements shall apply:
a) The Trustees clearly demonstrate that the
proposed contract will result in actual overall
savings to the state, consistent with specific
elements in comparing costs, including:
i) The university's additional cost of
providing the same service as proposed by a
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contractor, as specified.
ii) Exclusion of the university's indirect
overhead costs unless these costs can be
attributed solely to the function in question and
would not exist if that function was not
performed by university employees.
a) Proposals to contract out shall not be
approved solely on the basis that savings will result
from lower contractor pay rates or benefits. Provides
that proposals to contract out work shall be eligible
for approval if the contractor's wages are at the
industry's level and do not significantly undercut
university pay rates.
b) The contract does not cause the displacement
of university employees, as specified.
c) The contract does not adversely affect the
university's nondiscrimination standards.
d) The savings shall be large enough to ensure
that they will not be eliminated by private sector and
university cost fluctuations that could normally be
expected during the contracting period.
e) The amount of savings clearly justify the size
and duration of the contracting agreement.
f) The contract is awarded through a publicized,
competitive bidding process.
g) The contract includes specific provisions
pertaining to the qualifications of the staff that
will perform the work under the contract, as well as
assurance that the contractor's hiring practices meet
applicable nondiscrimination standards.
h) The potential for future economic risk to the
university from potential contractor rate increases is
minimal.
i) The contract is with a firm, defined as a
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corporation, partnership, nonprofit organization, or
sole proprietorship.
j) The potential economic advantage of
contracting is not outweighed by the public's interest
in having a particular function performed directly by
the university.
1) Permits personal services contracts when any of the
following conditions can be met:
a) The contract is for a new university function
and the Legislature has specifically mandated or
authorized the performance of the work by independent
contractors.
b) The services contracted are not available
within the university, cannot be performed
satisfactorily by university employees, or are of a
highly specialized or technical nature that the
necessary expert knowledge, experience, and ability
are not available from the university's employees.
c) The services are incidental to a contract for
the purchase or lease of real or personal property, as
specified.
d) The legislative, administrative, or legal
goals and purposes cannot be accomplished through the
utilization of university employees because of the
need to protect against a conflict of interest or to
ensure independent and unbiased findings in cases
where there is a clear need for a different, outside
perspective, including obtaining expert witnesses in
litigation.
e) Due to an emergency, a contract is necessary
for the immediate preservation of the public health,
welfare, or safety.
f) The contractor will provide equipment,
materials, facilities, or support services that could
not feasibly be provided by the university in the
location where the services are to be performed.
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g) The contractor will conduct training courses
for which appropriately qualified university
instructors are not available.
h) The services are of an urgent, temporary, or
occasional nature, as specified.
STAFF COMMENTS
1) Need for the bill. According to the author's office,
"existing statute does not require the California State
University (CSU) to abide by the same standards of
accountability that apply to state agencies when it enters
into personal service contracts. In turn, on several
occasions, the CSU has contracted out for services without
either clearly expressing justification or proving fiscal
savings, or has entered into contracts with financially
unstable contractors that discontinue business, all of
which prove losses to the taxpayer." Further, the author
contends this has "resulted in several debunk contracts,
including: a California State University (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." The intent of this bill is to
provide the CSU employees the same contracting out
protections that apply to state workers.
2) 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.
3) Current CSU practice. According to the CSU, in 2012-13 it
had over 7,000 personal services contracts valued at a cost
of over $500 million for various services within the
University. These contracts are for services that include
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animal boarding, agricultural chemicals, archaeologists,
portable toilet suppliers, demolition contractors,
stonemasons, furniture suppliers, fire protection
providers, pest and vermin control, hazardous waste
disposal providers, and more. The CSU contends that, per
the requirements of Higher Education Employer-Employee
Relations Act (HEERA), the University meets and confers
with unions to negotiate the various provisions in the
collective bargaining agreements. Under HEERA, terms and
conditions of employment, such as wages, hours and working
conditions are considered to be within the mandatory scope
of bargaining or scope of representation. HEERA was passed
to promote "harmonious and cooperative labor relations
between the public institutions of higher education and
their employees."
4) Collective Bargaining. Provisions regarding contracting out
are an element of both the California State University
Employees Union - CSUEU (Article 3) and State Employees
Trades Council - SETC (Article 4) 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 required to provide the CSUEU all existing relevant
information, including request 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.
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Given that these contracting out provisions already exist
through collective bargaining, the Committee may wish to
consider whether this bill is necessary.
5) Civil Service exemption. This bill is modeled on State
Civil Service Act language used to govern personal services
contracting within the state. Provisions of the
California Constitution specifically exclude officers and
employees of the California State University (CSU) from
State Civil Service, and the Legislature has granted the
CSU other exemptions from civil service provisions,
including:
a) Exclusion from Public Contract Code provisions
regarding the acquisition of goods and services.
b) Authority to promulgate regulations without
having to utilize the procedures outlined in the
Administrative Procedures Act, thereby exempting CSU
from Office of Administrative Law review.
Therefore, the Committee may wish to consider whether the
CSU's current contracting out practices rise to a level of
concern that warrants the CSU being subject to civil
service-like provisions.
6) Arguments in opposition. The CSU indicates that the bill
places it into its own version of state civil service
contracting-out laws and restricts the Trustees' authority
to manage the system. "Current law already allows for a
contracting-out process at the CSU and protections for our
employees through our labor contracts. These changes would
subject the system to contrary statutes, reduce our ability
to leverage limited resources in cost-effective ways, and
result in increased administrative costs without any
benefit to students."
7) Purview of the Trustees? The provisions of this bill are
substantively similar to the requirements outlined for
state agencies under the Civil Service Act. However,
unlike state agencies, statute extends the authority to
administer the CSU and to adopt rules and regulations
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consistent with the laws of the state, to the CSU Trustees,
a body appointed by the Governor and confirmed by the
Senate.
If the Committee believes there is a need for greater clarity
around the use of personal services contracts at the CSU, staff
recommends that the bill be amended to: 1) authorize the
Trustees to enter into personal services contracts; 2) require
the Trustees to establish standards and conditions for their use
by January 1, 2018, while specifying that the standards and
conditions included in the bill shall be considered by the
Trustees; and 3) require the Trustees to submit a report on the
standards and conditions established to the relevant policy and
budget committees of the Legislature, the Legislative Analyst's
Office, the Governor, and the Department of Finance no later
than June 30, 2018.
8) Fiscal impact. According to the Assembly Appropriations
Committee, CSU will have one-time and ongoing costs of
around $100,000 to establish and implement the new process,
including establishing new policy followed by training of
procurement personnel throughout the system.
9) Related and prior legislation.
SB 376 (Lara, 2015) would have modified the requirements for
qualifying as a lowest responsible bidder or best value awardee
for contracts for specified services at the University of
California (UC). This measure was vetoed by the Governor with
the following message:
Senate Bill 376 seeks to bring wage and benefit parity
to the University of California's contracted workers
in specific job categories, such as custodial,
clerical and food services, and other services
associated with the University's medical enterprises.
The bill touches several issues - from contracting out
service industry work that could be performed by
employees, to the pay and working conditions of
contracted workers, to the need for more vigorous
oversight of contract employers.
Without a doubt, these are all serious matters to
consider, and they reflect the difficulty in balancing
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things we commonly value, such as increasing the wages
of low-income workers and keeping operational costs
down. It's worth noting that the University of
California recently responded to criticisms of its
wage and contracting practices with a plan to
incrementally increase its minimum wage for both
employees and contract workers, and a pledge to better
oversee contracts generally.
The effort to provide increased compensation to those
who work for UC - either directly or on a contract
basis - is well-intentioned, but I'm not prepared to
embrace the provisions of this bill.
I would caution the University, however, to provide a
transparent accounting of its contracts and clearly
demonstrate how the interests of all its lower paid
workers are being protected.
SB 669 (Pan, 2015) was substantively similar to this bill and
proposed to establish standards for the use of personal services
contracts by the CSU. This bill was scheduled to be heard in
this Committee on April 22, 2015, but canceled at the author's
request.
SB 943 (Beall, 2014) was also substantively similar to this
bill. In addition it assigned the State Personnel Board
oversight of California State University (CSU) contracting
practices. SB 943 was heard by this Committee on April 30, 2014
and failed passage by a vote of 2-2.
AB 2225 (Lowenthal, 2002) proposed similar personal services
contracting standards for the CSU. AB 2225 was heard by this
Committee in June 2002, and was held without recommendation.
SUPPORT
American Federation of State, County and Municipal Employees
California Faculty Association
California Labor Federation
California State University Employees Union
Services Employees International Union
University Professional and Technical Employees - Communication
Workers of
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American Local 9119
OPPOSITION
California Chamber of Commerce
California State University
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