Amended in Senate August 2, 2016

Amended in Senate June 14, 2016

Amended in Assembly April 26, 2016

California Legislature—2015–16 Regular Session

Assembly Bill No. 2316

Introduced by Assembly Member O'Donnell

(Coauthor: Assembly Member Mullin)

February 18, 2016

An act to amend Sections 17400 and 17406 of the Education Code, relating to school facilities.

LEGISLATIVE COUNSEL’S DIGEST

AB 2316, as amended, O'Donnell. School facilities: leasing property.

Existing law requires the governing board of a school district to adopt a resolution that, among other things: (1) declares its intention to enter into a lease or agreement relating to school property, (2) includes specified information about the property, and (3) fixes a time for a public meeting of the governing board of the school district at which sealed proposals to enter a lease or agreement with the school district will be received from any person, firm, or corporation, and considered by the governing board of the school district, as specified.

Existing law, notwithstanding the provision described above, also authorizes the governing board of a school district, without advertising for bids, to lease real property for a minimum rental of $1 per year if the instrument by which this property is leased requires the lessee to construct, or provide for the construction of, a building to be used by the school district and provides that the title to the building shall vest in the school district at the end of the lease.

This bill would delete the language that provides that the governing board of a school district is not required to advertise for bids pursuant to this provision. The bill would require an instrument created pursuant to these provisions to be awarded based on a competitive solicitation process to the proposer providing the best value, as defined, to the school district. The bill would require the governing board of the school district to adopt and publish required procedures and guidelines for evaluating the qualifications of proposers, as provided. The bill would authorize a school district to enter into an instrument before written approval is obtained from the Department of General Services’ Division of the State Architect (DSA) if the instrument provides that no work for which a contractor is required to be licensed and for which DSA approval is required shall be performed before receipt of the required DSA approval. The bill would begin delete also make the bill’s provisions retroactively applicable to end delete begin insert provide, for end insert certain projects leased through an instrument before July 1, 2015, begin delete and would specify that end delete if begin insert at any time end insert the instrument is begin delete later end delete determined to be begin delete invalid, end delete begin insert invalid by a court of competent jurisdiction because it fails to fall within the former competitive bidding exception, that end insert the contractor who entered into the contract with the school district begin delete shall be entitled to end delete begin insert may end insert be paid the reasonable cost of the labor, equipment, materials, and services furnished by the contractor before the date of the determination, begin delete subject to specified conditions. end delete begin insert if certain conditions, as determined by the court, are met. end insert The bill would authorize a school district to identify specific types of subcontractors required to be included in a proposal, and would impose specified other procedural requirements on awarding construction subcontracts of a certain value. The bill would provide that the changes made by its provisions, except the deletion of the governing board of a school district’s authority to not advertise for bids, shall become inoperative on July 1, 2022.

Vote: majority. Appropriation: no. Fiscal committee: no. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 17400 of the Education Code is amended
to read:

17400.  

(a) Any school district may enter into leases and
agreements relating to real property and buildings to be used by
the school district pursuant to this article.

(b) As used in this article, the following terms have the following
meanings:

(1) “Best value” means a competitive procurement process
whereby the selected proposer is selected on the basis of objective
criteria for evaluating the qualifications of proposers with the
resulting selection representing the best combination of price and
qualifications.

(2) “Best value score” means the total score awarded to a
proposer for all scored evaluation factors.

(3) “Building” includes each of the following:

(A) One or more buildings located or to be located on one or
more sites.

(B) The remodeling of any building located on a site to be leased
pursuant to this article.

(C) Onsite and offsite facilities, utilities, or improvements that
the governing board of the school district determines are necessary
for the proper operation or function of the school facilities to be
leased.

(D) The permanent improvement of school grounds.

(4) “Preconstruction services” means advice during the design
phase including, but not limited to, scheduling, pricing, and phasing
to assist the school district to design a more constructible project.

(5) “Site” includes one or more sites, and also may include any
building or buildings located or to be located on a site.

SEC. 2.  

Section 17406 of the Education Code, as amended by
Section 1 of Chapter 214 of the Statutes of 2015, is amended to
read:

17406.  

(a) (1) Notwithstanding Section 17417, the governing
board of a school district may let, for a minimum rental of one
dollar ($1) a year, to a person, firm, or corporation real property
that belongs to the school district if the instrument by which this
property is let requires the lessee therein to construct on the
demised premises, or provide for the construction thereon of, a
building or buildings for the use of the school district during the
term of the lease, and provides that title to that building shall vest
in the school district at the expiration of that term. The instrument
may provide for the means or methods by which that title shall
vest in the school district before the expiration of that term, and
shall contain other terms and conditions as the governing board
of the school district may deem to be in the best interest of the
school district.

(2) An instrument created pursuant to paragraph (1) shall be
awarded based on a competitive solicitation process to the proposer
providing the best value to the school district, taking into
consideration the proposer’s demonstrated competence and
professional qualifications necessary for the satisfactory
performance of the services required. Before awarding an
instrument pursuant to this section, the governing board of the
school district shall adopt and publish required procedures and
guidelines for evaluating the qualifications of proposers that ensure
the best value selections by the school district are conducted in a
fair and impartial manner. These procedures and guidelines shall
be mandatory for the school district when awarding an instrument
pursuant to this section. The required procedures shall include, at
a minimum, the following:

(A) The school district shall prepare a request for sealed
proposals from qualified proposers. The school district shall include
in the request for sealed proposals an estimate of price of the
project, a clear, precise description of any preconstruction services
that may be required and the facilities to be constructed, the key
elements of the instrument to be awarded, a description of the
format that proposals shall follow and the elements they shall
contain, the standards the school district will use in evaluating
proposals, the date on which proposals are due, and the timetable
the school district will follow in reviewing and evaluating
proposals.

(B) The school district shall give notice of the request for sealed
proposals in the manner of notice provided in Section 20112 of
the Public Contract Code and in a trade paper of general circulation
published in the county where the project is located, with the latest
notice published at least 10 days before the date for receipt of the
proposals.

(C) A proposer shall be prequalified in accordance with
subdivisions (b) to (m), inclusive, of Section 20111.6 of the Public
Contract Code in order to submit a proposal. If used, electrical,
mechanical, and plumbing subcontractors shall be subject to the
same prequalification requirements for prospective bidders
described in subdivisions (b) to (m), inclusive, of Section 20111.6
of the Public Contract Code, including the requirement for the
completion and submission of a standardized prequalification
questionnaire and financial statement that is verified under oath
and is not a public record. These prequalification requirements
shall be included in an instrument created pursuant to paragraph
(1).

(D) The request for sealed proposals shall identify all criteria
that the school district will consider in evaluating the proposals
and qualifications of the proposers, including relevant experience,
safety record, price proposal, and other factors specified by the
school district. The price proposal shall include, at the school
district’s discretion, either a lump-sum price for the instrument to
be awarded or the proposer’s proposed fee to perform the services
requested, including the proposer’s proposed fee to perform
preconstruction services or any other work related to the facilities
to be constructed, as requested by the school district. The request
for proposals shall specify whether each criterion will be evaluated
pass-fail or will be scored as part of the best value score, and
whether proposers must achieve any minimum qualification score
for award of the instrument under this section.

(E) For each scored criterion, the school district shall identify
the methodology and rating or weighting system that will be used
by the school district in evaluating the criterion, including the
weight assigned to the criterion and any minimum acceptable score.

(F) Proposals shall be evaluated and the instrument awarded
under this section in the following manner:

(i) All proposals received shall be reviewed to determine those
that meet the format requirements and the standards specified in
the request for sealed proposals.

(ii) The school district shall evaluate the qualifications of the
proposers based solely upon the criteria and evaluation
methodology set forth in the request for sealed proposals, and shall
assign a best value score to each proposal. Once the evaluation is
complete, all responsive proposals shall be ranked from the highest
best value to the lowest best value to the school district.

(iii) The award of the instrument shall be made by the governing
board of the school district to the responsive proposer whose
proposal is determined, in writing by the governing board of the
school district, to be the best value to the school district.

(iv) If the selected proposer refuses or fails to execute the
tendered instrument, the governing board of the school district
may award the instrument to the proposer with the second highest
best value score if the governing board of the school district deems
it to be for the best interest of the school district. If the second
selected proposer refuses or fails to execute the tendered
instrument, the governing board of the school district may award
the instrument to the proposer with the third highest best value
score if the governing board of the school district deems it to be
for the best interest of the school district.

(v) Notwithstanding any other law, upon issuance of a contract
award, the school district shall publicly announce its award,
identifying the entity to which the award is made, along with a
statement regarding the basis of the award. The statement regarding
the school district’s contract award and the contract file shall
provide sufficient information to satisfy an external audit.

(G) The governing board of the school district, at its discretion,
may reject all proposals and request new proposals.

(3) Following the award of an instrument created pursuant to
paragraph (1), and if the price proposal is not a lump sum for the
instrument awarded, the successful proposer shall provide the
school district with objectively verifiable information of its costs
to perform the services requested under the instrument and shall
select subcontractors as set forth in paragraph (4). Once any
preconstruction services are completed and subcontractors are
selected, the successful proposer and the school district shall
finalize the price for the services to be provided under the
instrument that does not exceed the price estimate in the request
for proposal. The contract file shall include documentation
sufficient to support the final price determination.

(4) (A) The school district, in the request for sealed proposals,
may identify specific types of subcontractors that must be included
in the proposal. All subcontractors that are identified in the
proposal shall be afforded the protections of the Subletting and
Subcontracting Fair Practices Act (Chapter 4 (commencing with
Section 4100) of Part 1 of Division 2 of the Public Contract Code).

(B) Following the award of an instrument created pursuant to
paragraph (1) and for subcontractors not identified in the proposal,
the successful proposer shall proceed as follows in awarding
construction subcontracts with a value exceeding one-half of 1
percent of the price allocable to construction work:

(i) Provide public notice of availability of work to be
subcontracted in accordance with the publication requirements
applicable to the competitive bidding process of the school district,
including a fixed date and time on which qualifications statements,
bids, or proposals will be due.

(ii) Establish reasonable qualification criteria and standards.

(iii) Award the subcontract either on a best value basis or to the
lowest responsible bidder. The process may include prequalification
or short-listing. The process begin delete does end delete begin insert shall end insert not apply to subcontractors
listed in the original proposal. Subcontractors awarded construction
subcontracts under this subdivision shall be afforded all the
protections of the Subletting and Subcontracting Fair Practices
Act (Chapter 4 (commencing with Section 4100) of Part 1 of
Division 2 of the Public Contract Code).

(5) Nothing in paragraph (2) shall preclude a school district
from segregating the request for proposals into a request for
qualifications, followed by a request for proposals with price
information from the proposers deemed most qualified by the
school district, provided that the procedures specified in paragraphs
(2), (3), and (4) are otherwise followed.

(b) Notwithstanding Sections 17297 and 17402, a school district
may enter into an instrument created pursuant to paragraph (1) of
subdivision (a) before written approval by the Department of
General Services’ Division of the State Architect if the instrument
provides that no work for which a contractor is required to be
licensed in accordance with Article 5 (commencing with Section
7065) of Chapter 9 of Division 3 of the Business and Professions
Code and for which Division of the State Architect approval is
required shall be performed before receipt of the required Division
of the State Architect approval.

(c) A rental of property that complies with subdivision (a) as it
reads on the day that the lease is entered into shall be deemed to
have thereby required the payment of adequate consideration for
purposes of Section 6 of Article XVI of the California Constitution.

(d) (1) This subdivision shall apply begin delete retroactively end delete to a project
for the construction, alteration, repair, or improvement of any
structure, building, or other improvement of any kind that was
leased through an instrument pursuant to this section before July
1, 2015. If at any time the instrument is determined to be invalid
by a court of competent begin delete jurisdiction, end delete begin insert jurisdiction because it fails
to fall within the competitive bidding exception pursuant to
paragraph (1) of subdivision (a) end insert begin insert , as it read on December 31, 2016, end insert
the contractor who entered into the instrument with the school
district begin delete shall be entitled to end delete begin insert may end insert be paid the reasonable cost of the
labor, equipment, materials, and services furnished by the
contractor before the date of the determination that the instrument
is invalid if all of the following begin delete conditions end delete begin insert conditions, as
determined by the court, end insert are met:

(A) The contractor proceeded with construction, alteration,
repair, or improvement based upon a good faith belief that the
instrument was valid.

(B) The school district has reasonably determined that the work
performed is satisfactory.

(C) Contractor fraud did not occur in the obtaining or
performance of the instrument.

(D) The instrument does not otherwise violate state law related
to the construction or leasing of public works of improvement.

(2) In no event shall payment to the contractor pursuant to this
section exceed either of the following:

(A) The contractor’s costs as included in the instrument plus
the cost of any approved change orders.

(B) The lease payments made, less profit, at the point in time
the instrument is determined to be invalid by a court of competent
jurisdiction.

(3) Notwithstanding paragraph (1), this subdivision shall not
affect any protest and legal proceedings, whether contractual,
administrative, or judicial, to challenge the award of the public
works contract, nor affect any rights under Section 337.1 or 337.15
of the Code of Civil Procedure.

(e) This section shall become inoperative on July 1, 2022, and,
as of January 1, 2023, is repealed, unless a later enacted statute,
that becomes operative on or before January 1, 2023, deletes or
extends the dates on which it becomes inoperative and is repealed.

SEC. 3.  

Section 17406 of the Education Code, as added by
Section 2 of Chapter 408 of the Statutes of 2014, is amended to
read:

17406.  

(a) Notwithstanding Section 17417, the governing
board of a school district may let, for a minimum rental of one
dollar ($1) a year, to any person, firm, or corporation any real
property that belongs to the school district if the instrument by
which this property is let requires the lessee to construct on the
demised premises, or provide for the construction thereon of, a
building or buildings for the use of the school district during the
term of the lease, and provides that title to that building shall vest
in the school district at the expiration of that term. The instrument
may provide for the means or methods by which that title shall
vest in the school district before the expiration of that term, and
shall contain other terms and conditions as the governing board
of the school district may deem to be in the best interest of the
school district.

(b) Any rental of property that complies with subdivision (a)
shall be deemed to have thereby required the payment of adequate
consideration for purposes of Section 6 of Article XVI of the
California Constitution.

(c) This section shall become operative on July 1, 2022.