BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                     SB 376

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          376 (Lara)

          As Amended  August 18, 2015

          Majority vote

          SENATE VOTE:  24-14

          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |Higher          |9-3  |Medina, Bloom, Irwin, |Baker, Chávez,      |
          |Education       |     |                      |Harper              |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Jones-Sawyer, Levine, |                    |
          |                |     |Linder, Santiago,     |                    |
          |                |     |Weber, Williams       |                    |
          |                |     |                      |                    |
          |Accountability  |6-3  |Salas, Burke,         |Lackey, Brough,     |
          |                |     |Frazier, Irwin,       |Beth Gaines         |
          |                |     |Medina, Rodriguez     |                    |
          |                |     |                      |                    |
          |Appropriations  |12-5 |Gomez, Bloom, Bonta,  |Bigelow, Chang,     |
          |                |     |Calderon, Nazarian,   |Gallagher, Jones,   |
          |                |     |Eggman, Eduardo       |Wagner              |


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          |                |     |Garcia, Holden,       |                    |
          |                |     |Quirk, Rendon, Weber, |                    |
          |                |     |Wood                  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |

          SUMMARY:  Requires bidders on University of California (UC)  
          contracts for specified types of personal services to certify  
          that their employees' total compensation does not undercut the  
          compensation of UC employees doing comparable work.   
          Specifically, this bill:  

          1)Applies the cost standard described above to the following  
            types of contracts:  building maintenance, cleaning or  
            custodial services, call centers services, clerical services,  
            dining and food service, 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 assistance services.

          2)Requires a bidder to certify that its total employee  
            compensation package, including fringe benefits and valued on  
            a per-employee basis, does not materially undercut UC's total  
            compensation for employees doing comparable work at the  
            relevant campus, medical center, or laboratory.

          3)Requires UC to include in its request for proposals, a  
            calculation of the average per-employee value of total  
            compensation for UC employees relevant to a particular  
            contract, and to incorporate all known cost escalators for  
            projecting the rate of growth of average per-employee  


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          4)Stipulates that the current requirement that UC service  
            contracts - other than for personal or professional services -  
            involving expenditures of $100,000 or more annually be awarded  
            to the lowest responsible bidder, includes the renewal or  
            extension of such contracts.

          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 (PCC) 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). 


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          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, the UC estimates that, of its total annual spending  
          on service contracts ($1.2 billion), about $120 million, or 10%,  
          are for the specific types of services that would be subject to  
          the requirements of this bill.  Assuming a 30% increase in costs  
          related to providing parity in benefits, total annual costs  
          would be $36 million.  The additional costs to provide wage  
          parity, assuming a 10% to 20% cost impact, would be $12 million  
          to $24 million.  This impact should diminish over time due to  
          implementation of UC's Fair Wage/Fair Work plan, which will be  
          applied to new contracts and as existing contracts are  
          renewed/extended.  These costs will come from a variety of UC  
          fund sources, including the State General Fund, federal funds,  
          auxiliary funds, and enterprise funds, such as from the medical  

          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% 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  


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          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  
          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."

          Fair Wage/Fair Work plan.  The UC announced its Fair Wage/Fair  
          Work plan in July, which will establish the minimum wage for  
          contract workers at $13 per hour starting October 2015,  
          increasing to $15 per hour as of October 1, 2017.  This plan  
          will also involve a monitoring and compliance program to ensure  
          contractors are complying with UC policies and all federal,  
          state, and local laws.  Finally, the program will include annual  
          compensation audits of all contracts and spot audits of selected  
          contracts.  The UC contends that this plan "substantially  
          addresses the concerns that prompted the introduction of SB 376,  
          in a way that is financially feasible to the university."

          To note, according to the UC, some of its collective bargaining  
          agreements contain provisions stating that the UC will not  
          contract out for services solely on the basis that savings will  
          result from lower contractor pay rates and benefits for services  
          customarily performed by bargaining unit employees or that  


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          result in layoff of bargaining unit employees.  These agreements  
          specify the instances in which UC may contract out for services  
          including, when there is a need for special expertise or  
          experience, for short-term or temporary staffing needs, for  
          special services and equipment that are not available  
          internally, or for services at a leased facility where the  
          services are provided by the owner.

          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.  The UC argues that, in addition to  
          increasing costs, the bill will create administrative burdens,  
          in part by requiring an analysis to determine per-employee  
          compensation for every type of contract and factoring in all  
          known cost escalators to project future per-employee costs.   
          Additionally, the UC contends that the bill will hinder its  
          ability to make its contracting more efficient by using  
          systemwide rather than site-specific contracts.

          Analysis Prepared by:                                             
                          Jeanice Warden / HIGHER ED. / (916) 319-3960   
          FN: 0001650


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