BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON EDUCATION
                              Senator Carol Liu, Chair
                                2015 - 2016  Regular 

          Bill No:             SB 376               
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          |Author:    |Lara                                                 |
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          |Version:   |April 6, 2015                               Hearing  |
          |           |Date:   April 22, 2015                               |
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          |Urgency:   |No                     |Fiscal:    |Yes              |
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          |Consultant:|Kathleen Chavira                                     |
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          Subject:  Public contracts:  University of California

            SUMMARY
          
          This bill modifies the requirements for qualifying as a lowest  
          responsible bidder or best value awardee for contracts for  
          materials, goods, and services at the University of California  
          (UC) in that it; 1) require a bidder to certify in writing that  
          its employees are compensated at a level that does not  
          materially undercut the average per-employee total compensation  
          for UC employees who perform comparable work, 2) eliminates the  
          exception to the $100,000 threshold for competitive bidding of  
          contracts for personal services, and 3) makes existing law and  
          the provisions of the bill applicable to any renewal or  
          extension of an existing contract if it involves an expenditure  
          of $100,000 or more annually.  

            BACKGROUND
          
          Existing law outlines the requirements and procedures for  
          competitive bidding at the University of California.  Existing  
          law outlines requirements and procedures, specifically for the  
          acquisition of materials, goods and services. 
          (Public Contract Code  10500, et. seq.)

          Current law requires the UC to let any contract involving an  
          expenditure of $100,000 or more annually for goods and  
          materials, or for services to be performed (other than personal  
          or professional services) to the lowest responsible bidder.   
          (PCC  10507.7)







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          Current law authorizes the UC, when it determines that it can  
          expect long-term savings, as specified, to select the lowest  
          responsible bidder on the basis of the best value to the  
          university. (PCC 10507.8) 

          Current law declares the intent of the Legislature to facilitate  
          the participation of small businesses, particularly small  
          disadvantaged or minority business enterprises, women business  
          enterprises and disabled veteran business enterprises in  
          business contracting with the UC.  (PCC  10500.5)

            ANALYSIS
          
          This bill modifies the requirements for qualifying as a lowest  
          responsible bidder or best value awardee for contracts for  
          materials, goods, and services at the University of California  
          (UC).  Specifically it:

          1.   Requires a bidder to certify in writing to the University  
               of California (UC) that the bid includes a total employee  
               compensation package, including fringe benefits, that is  
               valued at a basis that does not materially undercut the  
               average per-employee value of total compensation for  
               employees at the UC who perform comparable work at the  
               relevant campus, medical center, or laboratory, where the  
               proposed work will be performed.

          2.   Requires the UC to:

                    A.             Include in its request for proposals a  
                    calculation which considers the criteria outlined in  
                    #1.

                    B.             Use all known cost escalators in the  
                    calculation to project the future rate of growth of  
                    average per-employee total compensation costs. 

          3.   Eliminates the exception to the $100,000 threshold for  
               competitive bidding of contracts for personal services. 

          4.   Expands the requirements of existing law and the provisions  
               of the bill to include any renewal or extension of an  
               existing contract if it involves an expenditure of $100,000  








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               or more annually.  

          5.   Makes findings and declarations that the UC has squandered  
               public resources via contracting out to for-profit private  
               contractors that charge significant administrative  
               overhead. 

          6.   Makes technical and clarifying changes.
          
          STAFF COMMENTS
          
          1.   Need for the bill.  According to the author, this bill  
               seeks to address the growing challenge to California of the  
               use of contingent workers to replace employees and the  
               consequential effect it has on wages and worker  
               protections.  This bill would require the UC, when  
               evaluating bids for contract work, to evaluate the total  
               employee compensation package and ensure that it does not  
               undercut wages and benefits of existing university  
               employees.  According to the author, the UC serves as an  
               anchor institution in the markets in which it operates, and  
               as a public institution, and the third-largest California  
               employer, should adopt and promote policies that respect  
               its employees and protect workers' rights. 

          2.   Related Study.   According to a 2012 study by the UC  
               Berkeley Labor Center, Temporary Workers in California are  
               Twice as Likely as Non-Temps to Live in Poverty: Problems  
               with Temporary and Subcontracted Work in California, almost  
               one-quarter of a million people worked in the temporary  
               help services industry in California in 2010.  These  
               workers were slightly younger, more likely to be female,  
               less likely to be white non-Hispanic, and less likely to  
               have a high school diploma or GED than the average non-temp  
               worker.  These workers were also more susceptible to  
               workplace illness and injury, earned less than their  
               non-temp counterparts, and were less likely to get  
               benefits.  The report notes that lowered wages mean that  
               these workers rely more on the state safety net than their  
               direct-hire counterparts and that these employment  
               arrangements undermine worker protections by allowing  
               employers to avoid certain provisions of worker protection  
               and making it difficult to enforce other protections. The  
               report also notes that these employment relationships  








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               create downward pressure on wages. 
          
          3.   Related Contract Provisions.  According to the University  
               of California (UC), Article 5 of its contract with  
               employees represented by American Federation of State,  
               County and Municipal Employees (AFSCME) addresses the issue  
               of contracting out.  These provisions specifically prohibit  
               the UC from contracting out services solely on the basis  
               that savings will result from lower contractor pay rates  
               and benefits for services customarily performed by  
               bargaining unit employees.  The UC is permitted to contract  
               out for special services and equipment unavailable  
               internally, to obtain special expertise or efficiencies  
               better provided through an outside contractor, for  
               short-term temporary staffing needs, financial necessity,  
               and for remote facilities.  The bargaining contract also  
               provides that when the UC contracts for services  
               customarily provided by AFSCME unit employees, it must  
               provide a copy of any request for proposals within 10  
               business days of issuance, requires the UC to provide all  
               relevant non-confidential written information used in the  
               making of the contracting out decision, requires  
               accommodation of any meeting request by AFSCME, and  
               establishes a complaint process through the Office of the  
               President, Office of Labor Relations.  The Office of the  
               President is required to make the final determination  
               whether conditions were met and the decision is not  
               grievable or arbitrable. The contract also requires that,  
               for bargaining unit employees laid off or released because  
               of a contract, the UC make available another bargaining  
               unit position for which the employee is qualified at the  
               same location.

               Staff was not provided with any documentation of formal  
               complaints to the UC for failure to comply with these  
               contract provisions. 

          4.   Elimination of exception for personal services contracts.   
               According to the UC, the current exemption for these  
               contracts from the $100,000 threshold allows the UC to  
               contract directly with individuals and groups to contract  
               for services such as classroom and special event sign  
               language translation services, and for speaker, concert,  
               dance, symphony, orchestra and sports venue performances.  








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               These contracts, to the extent they exceed $100,000 in  
               value, would now be subject to competitive bidding. 

          5.   Will it work?  This bill requires bidders to certify to  
               meeting the specified requirements regarding compensation.  
               While it is clear that the cost of the contracts will  
               increase to reflect the increased compensation levels, it  
               is unclear whether the benefits to contingent workers  
               envisioned by the bill will be achieved.  There does not  
               appear to be any mechanism in this bill which will ensure  
               that employers will adhere to the compensation practices  
               which they certify to in their bid.  



               The University of California (UC) is not in a position to  
               monitor or enforce ongoing compliance with these  
               requirements.  It is unclear who will be responsible for  
               the oversight necessary to hold contractors accountable for  
               compliance with their certifications.

          6.   Consequences?  Ultimately this bill would result in  
               increasing UC's costs for procuring services and could  
               potentially limit the pool of qualified bidders.  The  
               Committee may wish to consider:

               What would be the impact on smaller businesses  
               (particularly those which are disadvantaged or minority  
               business enterprises, women business enterprises and  
               disabled veteran business enterprises) wishing to contract  
               with the UC?

               Should/how will these restrictions apply to contracts for  
               materials and goods?  

               How would these provisions affect the efforts of the  
               University to respond to recent directives that the UC  
               minimize its administrative costs and operate more  
               efficiently in order to more cost effectively meet the  
               state's teaching and research needs?

            SUPPORT
          








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          American Federation of State, County and Municipal Employees,  
          AFL-CIO
          California Teamsters Public Affairs Council
          In the Public Interest

            OPPOSITION
           
           University of California

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