BILL ANALYSIS                                                                                                                                                                                                    

                                                                     SB 376

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          Date of Hearing:  July 7, 2015


                                 Jose Medina, Chair

          376 (Lara) - As Amended June 29, 2015

          [Note:  This bill is double referred to the Assembly  
          Accountability and Administrative Review Committee and will be  
          heard as it relates to issues under its jurisdiction.]

          SENATE VOTE:  24-14

          SUBJECT:  Public contracts:  University of California

          SUMMARY:  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, this bill:  

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

          2)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  


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            work at the relevant campus, medical center, or laboratory,  
            where the proposed work will be performed.

          3)Specifies that the aforementioned requirements apply  
            specifically to contracts for building maintenance, cleaning,  
            or custodial services, call center services, clerical  
            services, dining and food services, gardening, grounds keeping  
            and plant nursery services, laborer services, mailroom  
            services, parking, shuttle bus, truck driving, or  
            transportation services, security services, storekeeper  
            services, patient care technical employee services, patient  
            billing services, medical transcribing services, patient  
            escort services, or nursing assistant services. 

          4)Exempts the application of said requirements to 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; and,  
            exempts public works projects conducted by public agencies.

          5)Requires the UC to:  a) include in its request for proposals a  
            calculation which considers the criteria outlined in number  
            two above; and, b) use all known cost escalators in the  
            calculation to project the future rate of growth of average  
            per-employee total compensation costs. 

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

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

          8)Makes technical and clarifying changes to existing law.


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          EXISTING LAW:   

          1)Outlines the requirements and procedures for competitive  
            bidding at the UC; and, outlines requirements and procedures,  
            specifically for the acquisition of materials, goods, and  
            services (Public Contract Code Section 10500, et seq.).

          2)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 Section 10500.5).

          3)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 Section  

          4)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 Section 10507.8). 

          FISCAL EFFECT:  According to the Senate Appropriations  
          Committee, costs to UC to be below $66 million.  Costs are  
          primarily due to the requirement that bidders certify total  
          compensation packages for their employees and ensuring that they  
          are comparable to 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. Additionally, UC administrative costs of $350,000 for  


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          bid renegotiation.

          COMMENTS:  Background.  According to a 2012 UC Berkeley Labor  
          Center report, entitled, "Temporary Workers in California are  
          Twice as Likely as Non-Temps to Live in Poverty: Problems with  
          Temporary and Subcontracted Work in California," in California  
          almost one-quarter of a million people worked in the temporary  
          help services industry in 2010.  The report finds that temporary  
          and subcontracted workers on a whole, are more likely to be  
          female, less likely to be white non-Hispanic, and less likely to  
          have a high school diploma or equivalency certificate than the  
          average non-temporary employee.

          Additionally, the report finds that temporary and subcontracted  
          employees are twice as likely as non-temporary employees to live  
          in poverty, receive food stamps, and be on Medicaid.  The report  
          finds that temporary and subcontracted employees earned roughly  
          18 percent less than equivalent non-temporary employees of the  
          same age, gender, and ability.  

          The report also finds that temporary and subcontracted employees  
          were also more susceptible to workplace illness and injury, and  
          were less likely to get benefits.  The report notes that lowered  
          wages mean that temporary and subcontracted employees 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; making it difficult to enforce other protections.   
          Lastly, the report finds that these employment relationships  
          create downward pressure on wages. 

          Need for the measure.  According to the author, "SB 376 seeks to  


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          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."  The author  
          contends that this measure will ensure that the UC evaluates the  
          total employee compensation package of bids for contract work in  
          order to ensure that employment that is contracted out to  
          contingent workers does not, "undercut the value of existing  
          university employees."

          Current UC practices for contracting out.  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.  The 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. 

          To note, 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  


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          employee is qualified at the same location.

          Arguments in support.  According to the California Labor  
          Federation, the UC continues to contribute to the problem of  
          regularly relying on a "subcontracted worker model, risking the  
          jobs and putting downward pressure on wages of direct hire  
          employees."  The Labor Federation contends that, "SB 376  
          implements improved standards to pay its subcontracted employees  
          at a level that does not undercut the wages of comparable  
          regular UC employees in order for that bidder to qualify as a  
          'lowest responsible bidder' or best value awardee.'"

          Arguments in opposition.  According to the UC, the system has a  
          number of policies, guidelines, and collective bargaining  
          agreements in place to minimize the impact contracting for  
          services could have on current employees. The UC states that,  
          "SB 376 may limit the ability of the UC to contract for unique,  
          specialized services, and could limit the types of cultural  
          services it offers to the communities in which campuses are  
          located.  The UC contends that this measure would increase the  
          number of competitive bids that the UC would have to administer  
          by eliminating the ability to extend or renew an existing  
          contract for services.

          Committee consideration.  Committee staff understands that  
          presently, the California State University System (CSU) follows  
          a similar process to that of the UC.  The Committee may wish to  
          consider if the provisions of this measure should also be made  
          applicable to the CSU.




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          American Federation of State, County and Municipal Employees,  

          California Labor Federation

          California Teamsters Public Affairs Council

          Central Labor Council of Contra Costa County, AFL-CIO


          University of California

          Analysis Prepared by:Jeanice Warden / HIGHER ED. / (916)  


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