BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
SB 376 (Lara) - Public contracts: University of California
-----------------------------------------------------------------
| |
| |
| |
-----------------------------------------------------------------
|--------------------------------+--------------------------------|
| | |
|Version: April 6, 2015 |Policy Vote: ED. 7 - 2 |
| | |
|--------------------------------+--------------------------------|
| | |
|Urgency: No |Mandate: No |
| | |
|--------------------------------+--------------------------------|
| | |
|Hearing Date: May 4, 2015 |Consultant: Jillian Kissee |
| | |
-----------------------------------------------------------------
This bill meets the criteria for referral to the Suspense File.
Bill
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) by: (1) requiring bidders to certify that bids
include a total employee compensation package that does not
materially undercut the average total compensation for UC
employees who perform comparable work; (2) eliminating the
exception to the $100,000 threshold for competitive bidding of
contracts for personal services; and (3) making any renewal or
extension of an existing contract to be sold to the lowest
responsible bidder if it involves an expenditure of $100,000 or
more annually.
Fiscal
Impact:
UC estimates that the bill would increase contract costs by at
least $66 million, primarily as a result of the requirement
that bidders certify total compensation packages for their
SB 376 (Lara) Page 1 of
?
employees have parity with those of UC employees. Actual
costs are unknown and would depend upon a number of factors,
including the impacts the bill would have on future
contracting behavior by UC, the number of contracts entered
into in the future, and any increases in bid prices to reflect
the required compensation parity.
UC administrative costs of approximately $354,000 for bid
renegotiation.
Background: 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 be sold to the lowest responsible
bidder. It also 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.
According to the 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 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.
This bill includes legislative findings and declarations that
reference findings of a recent study. This 2012 study was
conducted as part of a professional education program at the
Goldman School of Public Policy at UC Berkeley entitled,
Temporary Workers in California are Twice as Likely as Non-Temps
to Live in Poverty: Problems with Temporary and Subcontracted
Work in California. The report notes that lowered wages mean
that temporary workers rely more on the state safety net than
SB 376 (Lara) Page 2 of
?
their direct-hire counterparts. Furthermore, it asserts that by
paying workers more, significant savings could be achieved to
the state through less reliance on those programs.
Proposed Law:
This bill requires a bidder to certify in writing to the UC
that the bid includes a total employee compensation package
(including fringe benefits) that does not materially undercut
the average UC per-employee value of total compensation that
perform comparable work at the relevant campus, medical center,
or laboratory.
This bill also requires the UC to include in its request for
proposals the calculation of the average per-employee value of
total compensation for UC employees who perform comparable work,
including all known cost escalators for future growth rate of
average costs.
This bill excludes personal services contracts from the $100,000
threshold for competitive bidding and applies requirements of
existing law and the provisions of this bill to any renewal or
extension of an existing contract if it involves an expenditure
of $100,000 or more annually.
Staff
Comments: This bill's requirement to certify comparable compensation
packages results in costs UC estimates to be of at least $66
million as bids could come in at significantly higher rates to
achieve salary and benefit parity of contracted workers to total
compensation paid to UC employees. UC estimates that of its
total annual spending on service contracts, $120 million would
be subject to increases in order to achieve parity. Their
estimate includes a 25 percent increase for salaries and 30
percent increase for benefits. This estimate does not include
pay and benefit differentials for contracted employees that work
at UC medical centers or national laboratories, which this bill
expressly includes. Actual costs are indeterminable and would
depend a number of factors, including current compensation
differentials between contractors and comparable UC employees,
the number of prospective contracts impacted by the bill's
requirements, and the potential impacts on the field of
available bidders for these contracts. Any secondary impacts or
potential savings from reduced reliance on state-provided social
safety net services would be speculative.
SB 376 (Lara) Page 3 of
?
In addition, UC anticipates increased administrative costs of
$354,000 to renegotiate bids that would have previously been
extended or renewed without the $100,000 threshold.
-- END --