BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 376| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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: SB 376 Page 2 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 SB 376 Page 3 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 SB 376 Page 4 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 SB 376 Page 5 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) SB 376 Page 6 University of California Prepared by:Kathleen Chavira / ED. / (916) 651-4105 6/1/15 16:58:13 **** END ****