BILL ANALYSIS                                                                                                                                                                                                    






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          |SENATE RULES COMMITTEE            |                        SB 376|
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                                   THIRD READING 


          Bill No:  SB 376
          Author:   Lara (D)
          Amended:  6/1/15  
          Vote:     21  

           SENATE EDUCATION COMMITTEE:  7-2, 4/22/15
           AYES:  Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan
           NOES:  Runner, Vidak

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 5/28/15
           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SUBJECT:   Public contracts:  University of California


          SOURCE:    Author
          
          DIGEST:   This bill modifies the requirements for qualifying as  
          a lowest responsible bidder or best value awardee for contracts  
          for specified services at the University of California (UC) by  
          (1) requiring a bidder to certify in writing, for specified  
          types of service contracts, 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, and (2) eliminating the exception to the  
          $100,000 threshold for competitive bidding of contracts for  
          personal services, and makes the threshold applicable to any  
          renewal or extension of an existing contract if it involves an  
          expenditure of $100,000 or more annually.  
           
           ANALYSIS:   









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          Existing law:

          1)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.)

          2)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)

          3)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) 

          4)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)

          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 UC.  Specifically it:

       1)Requires a bidder to certify in writing to the 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. In addition it:

               a)    Applies these requirements specifically to contracts  
               for building maintenance, cleaning, or custodial, call  
               center, dining, grounds keeping, laborer, mail room,  
               parking or transportation, security or patient care  
               technical employee, or nursing assistant services.

               b)    Exempts the application of these requirements to  







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               employees who are mentally or physically handicapped, or  
               both, who have been issued a license for employment for  
               employment at less than minimum wage by the Industrial  
               Welfare Commission. 

               c)    Exempts public works projects conducted by public  
               agencies from these requirements.

               d)    Requires the UC to:

                     i)             Include in its request for proposals a  
                   calculation which considers the criteria outlined in 1)  
                   above.

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

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

       3)Makes the threshold applicable to any renewal or extension of an  
            existing contract if it involves an expenditure of $100,000 or  
            more annually.  

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

       5)Makes technical and clarifying changes.
       
          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  
            requires the UC, when evaluating bids for contract work for  
            specified services, 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  







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            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 create downward pressure on wages. 
          
       3)Related Contract Provisions.  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 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  







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            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.

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

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:

           Costs to UC are estimated to be below $66 million.  Costs are  
            primarily due to the requirement that bidders certify total  
            compensation packages for their employees are comparable to  
            those of UC employees.  Actual costs are unknown and would  
            depend upon a number of factors, including the impacts this  
            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 $350,000 for bid renegotiation.

          SUPPORT:   (Verified  5/28/15)


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


          OPPOSITION:   (Verified5/30/15)







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          University of California


          Prepared by:Kathleen Chavira / ED. / (916) 651-4105
          6/1/15 16:58:13


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